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Mar 31, 2023
Bread Financial Q1 2023 Earnings Report
Reported strong Q1 2023 results with revenue growth and strategic progress.
Key Takeaways
Bread Financial reported a strong first quarter with a 40% increase in revenue, driven by a $230 million gain on portfolio sale and higher average loan balances. Net income was $455 million, or $9.08 per diluted share, and the company made progress in building capital and onboarding new business.
Net income was $455 million, or $9.08 per diluted share, which included a $230 million pretax gain on portfolio sale and a $235 million pretax reserve release.
Revenue increased by 40% to $1,289 million, or 15% excluding the portfolio sale gain.
Credit metrics were impacted by the transition of credit card processing services, with a delinquency rate of 5.7% and a net loss rate of 7.0%.
The total tangible common equity / tangible assets (TCE/TA) ratio increased to 9.1%.
Bread Financial
Bread Financial
Forward Guidance
Bread Financial's 2023 outlook remains unchanged from the guidance provided in January 2023, assuming a challenging macroeconomic landscape with continued inflationary pressures.
Positive Outlook
- Expect full year 2023 average credit card and other loans to grow at a mid-single digit rate relative to 2022.
- Total revenue growth for 2023, excluding the gain on portfolio sale, is anticipated to align with average loan growth.
- Expect a full year net interest margin similar to 2022.
- Company remains focused on delivering positive operating leverage for the full year.
- Company is confident in long-term guidance of a through-the-cycle average net loss rate below historical average of 6%.
Challenges Ahead
- Assumes a more challenging macroeconomic landscape with continued inflationary pressures.
- Assumes unemployment rate gradually moving to the mid-to-upper 4% range by year-end 2023.
- Anticipates an increase in total full year expenses versus 2022.
- Expects a net loss rate of approximately 7% for 2023, inclusive of impacts from the 2022 transition of credit card processing services.
- Expects continued pressure on consumers’ ability to pay due to persistent inflation.